Advanced Underwriting Consultants

Question of the Day – September 10

Ask the Experts!

Here’s the question of the day.

Question:  My 51 year old client is retiring from the police force this year.  If he takes money out of his 403b plan after retirement, is the distribution subject to the 10% penalty tax?

Answer:   Probably not.  There is a special exception to the 10% penalty tax for public safety employee retirees.  If a distribution is taken by a participant who retired from the employer sponsoring the plan at age 50 or later, then the distribution is exempt from the penalty tax.  The distribution is still subject to ordinary income tax.

Note that the special exception will be lost if the 403b plan balance is rolled over to an IRA.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.